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DEUTSCHE BANK CASE STUDY

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Case Study 1: Did Information Systems Cause Deutsche Bank to Stumble?

1) Identify the problem described in this case study. What management, organization, and technology factors contributed to this problem? The problem described in this case study is related to high costs as Deutsche Bank was a very unwieldy and expensive bank to operate thus it incurred high costs associated with coping with regulators and paying fines. All of these problems are because Deutsche Bank had undergone decades of mergers and expansion however throughout the whole process the bank did not make changes to integrate their information systems with those of their acquisitions. Management contribution: There was a lack of communication in the business in updating the management about the problems faced in the bank. Furthermore, the CFTC charged that Deutsche Bank submitted incomplete and untimely credit default swap data, failed to properly supervise employees responsible for swap data reporting and lacked an adequate business continuity and disaster recovery plan which was to be done by the management. Organization contribution: The organization did not create effective strategies and the bank's system outage and subsequent reporting problems occurred in part because Deutsche Bank failed to have an adequate business continuity and disaster recovery plan and other appropriate supervisory systems in place. Technology contribution: Deutsche Bank used outdated technology hence its swap data reporting system experienced a system outage that prevented Deutsche Bank from reporting any swap data for multiple asset classes for approximately five days. The bank's efforts to end the system outage repeatedly exacerbated the existing problems and led to creating new problems. According to Reuters Staff (2019), “Technology has long been a problem for Deutsche Bank. Former Chief Executive John Cryan complained in 2015 about “lousy systems” and “very slow processes”, and former operations chief Kim Hammonds last year described Deutsche as “vastly complex” and the “most dysfunctional” workplace she has known.”

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2) What was the role of information technology at Deutsche Bank? How was IT related to the Bank’s operational efficiency, decision-making capability and business strategy? Information technology is used to help with mergers, with core procedures, any tracking, and reports, as well as any shared information. The procedures and software were not up to date in Deutsche bank which is why it caused a lot of problems within the business such as misinformation. Later on, changes were made in the business with the information technology being updated by eliminating legacy software, standardizing and enhancing data, and improving reporting. The changes made to the technology by John Cryan led to IT helping the operational efficiency, decision-making capability and business strategy. As Sewing (2020) elucidates, “Together with our partners, we want to use the cloud as an accelerator for innovation, for example, by deploying more artificial intelligence and machine learning technology. We’ll be able to accomplish more and innovate more – and we’ll be cutting our costs as we do so.” Operational Efficiency: Deutsche Bank reduced the number of its individual operating systems that control the way a computer works and made a multibillion-dollar deal with HP which then allowed the bank to shift its applications and functions from its mainframe to HP’s cloud computing services. This promotes efficiency and better control and will reduce the costs of 800 million euros and creating total savings of 1 billion euros. Decision-making capability: The deal made with Hewlett Packard allowed Deutsche Bank to standardize and simplify its IT infrastructure, reduce costs, and create a more modern and agile technology platform for launching new products and services. Deutsche Bank migrated its systems to a cloud computing software infrastructure which would allow Deutsche Bank to have all the information available to them at any time hence allowing them to make precise decisions quickly. Furthermore, this would allow employers to have good communication with their employees as it would make it easier to contact them. Business Strategy: Information technology implemented would allow Deutsche bank to have all the data available to them through the cloud which helps them to launch to products and services. Moreover, the bank is still in charge of application development and information security technologies which is proprietary and crucial for competitive differentiation. All of these factors allow the bank to focus on making strategies that would help them analyze long-term competitive goals.

3) Was Deutsche Bank using technology effectively to pursue its business strategy? Explain your answer. No, Deutsche Bank was not using technology effectively to pursue its business strategies.

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According to Cryan (2015) “People at Deutsche loved setting up little groups to create their mini-platforms for developments. In 2015, the systems at Deutsche Bank were bad. Very bad, beyond end of life. There was the hardware that was no longer supported, software that could no longer be supported because it could only run on that hardware.” The bank had individual teams and traders who did not want to share the information they had with each other thus to reconcile the data it had to be recorded manually all over again. Furthermore, throughout the article, there were many statements brought up regarding the poor performance of IT in the bank. Aside from that, the technology seemed to be a part of many of their business strategies.

According to a Deutsche Insider (2015), “There was no integration and reporting was a nightmare. Trades between teams in investment banks were booked multiple systems and it was very difficult to represent the risk we were exposed to even in a single transaction.”

4) What solution for Deutsche Bank was proposed? How effective do you think it will be? Explain your answer. The solution proposed by the regulators to the bank was to improve the way they manage risk and to make their ageing computer systems comply with changing consumer expectations. In July 2015 John Cryan became Deutsche Bank’s CEO. He tried to reduce the costs and improve the efficiency of the bank. Furthermore, he appointed Kim Hammonds as Chief Operating Officer to update the old information systems. According to Butcher (2018), Thirteen out of 45 operating systems have disappeared, new risk analytics and pricing systems have been put in place, inter-systems have reconciliations have been cut from 1,000 to 600 (with a target of 300 by 2020), and last year Deutsche Bank had its most stable year ever for critical applications after working hard to stabilize its IT

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environment. There’s also “Fabric” Deutsche’s new cloud computing platform, which allows Deutsche Bank programmers to access the bank’s computing power in weeks rather than months and allows select third parties access to Deutsche’s storage and data to create applications which will benefit the bank and its clients.

Deutsche Bank also made a multi-billion dollar deal with HP where HP would provide computing services, hosting and storage while Deutsche Bank would still be in charge of application development and information security technologies. However, despite all these efforts, Deutsche Bank has struggled to regain profitability and stability.

According to Butcher (2018), Now that Cryan’s gone, however, it's becoming apparent that his authority over some senior managers at Deutsche Bank was weak. He and Hammond’s ability to challenge Deutsche’s most powerful tribal leaders to appear to have been correspondingly limited. “It's going to be a far more uphill task to cut systems in future,” says one senior insider. “It was an almost impossible job given the cost and revenue challenges,” says one.

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References

Butcher S. (2018, April 20). Inside Deutsche Bank’s “dysfunctional” IT division. Retrieved from https://news.efinancialcareers.com/uk-en/313445/technology-at-deutsche-bank Reuters Staff. (2019, October 7). Deutsche Bank in strategy shift to address tech woes. Retrieved from https://www.reuters.com/article/us-deutsche-bank-technology/deutsche-bankin-strategy-shift-to-address-tech-woes-idUSKBN1WM0U2 Samu A. (2020, June 30). Why is Deutsche Bank spending so much on Tech? Retrieved from http://disruptionbanking.com/2020/06/30/why-is-deutsche-bank-spending-so-much-on-tech/...